How to Respond to an IRS Tax Notice

An IRS tax notice almost always causes worries to the receiver. Many a time, there may be only a simple clarification needed, but understandably, panic is the first reaction. The best course of action is to comply with the IRS requisitions as early as possible, as all notices have contact numbers provided with a due date for response. They have a code-the letters ‘CP’ along with a specific number for each notice.

When a tax notice is received, you should check it against your tax return. Sometimes, additional information is requested or discrepancies in the tax return are brought to your notice so that suitable action can be taken against them. Tax notices and tax refund checks are dealt from different IRS locations, so there may be a time lag after filing a response and getting a refund if one is due.

Things to Do on Receipt of an IRS Tax Notice:

First, go through the letter in its entirety and understand the instructions or questions sent by the IRS.

You should respond within the time prescribed-usually 30 days-and it is always best to put in written form all details and to include all documents that can serve as evidence.

Failure to respond will result only in future problems, penalties, etc.

An IRS tax notice is sent for covering specific issues. Some of the reasons for IRS tax notices are:

1. Name misspelt. Re-file, giving the correct spelling of your name.

2. Wrongly given Social Security numbers. Give the correct number and re-file the return.

3. Overpaid Tax (CP-49): The IRS will indicate the overpaid amount with the correction to be done. Generally, an overpaid amount will be adjusted against other taxes owed by you. Typically, this requires no action from you if you agree with the amount. You will get the tax return in about 6 weeks.

4. Estimated Tax Discrepancy (CP-23): This will be issued when estimated and submitted tax payments do not tally. You have to have records like interest details from bank or brokerage reports, W-2s and canceled checks. It is best to cover the balance and get a refund later.

5. Audit Request: Sometimes, the IRS flags your tax return for audits, and it is better you get your tax preparer to represent you, as there could be a number of reasons for an audit request.

6. Underpaid Tax (CP-14): If the IRS is claiming that you have underpaid your taxes, and you do not agree, you should submit with records the reasons for not agreeing and attach the bottom tear-off portion of the notice to your response.

Once you send in the reply to the tax notice, the IRS will look into your reply and send another notice for additional payment as needed. But when you get a CP-14-‘Balance Due-No Math Error” notice, you should respond to it right away to avoid penalties, as the IRS is convinced that you have underpaid taxes, and this should be corrected. You can ask for a deferral or to make installment payments, but you should respond promptly without fail.

If you think you need help to solve the discrepancy issues, the Taxpayer Advocate can represent you, and you can have your own advocate as well.

Failure to Respond to an IRS Tax Notice:

If you do not respond, you will get a CP 501, “Reminder-Balance due” notice, which will mark the IRS’s seizure process. If you do not reply to this either, you will get the CP-504 “Urgent Notice-Balance Due,” after which the IRS will levy your accounts with a CP-90 notice. If you still fail to respond, the IRS can garnish Social Security benefits, levy your assets and seal your wages.

Warning: The IRS has warned that it does not send any e-mail messages about tax matters and that any unsolicited e-mails are part of scams and should not be answered.

Taxes having become part of our life, they cannot be ignored or wished away. So, the best policy is to get a correct assessment of the taxes due and pay them on time to avoid any penalties or the receipt of IRS tax notices.

When do you normally receive a reply from the IRS after filing taxes?

If you've paid your IRS taxes and filed your return, you can expect to have information about your refund within seventy-two hours of the IRS's acknowledging receipt of your e-filed return, or within three to four weeks after mailing your paper return. If you haven't received word by then, you can log on to the "Where's my refund" section of the IRS.gov website to help you learn more information about your return.

Note: the IRS may not contact you if they are reviewing your return or if they consider the notification might jeopardize collection of the tax liability. Of course, they might just be backed up.